US needs 'manufacturing renaissance' to compete with China: Report

M3 tanks under construction during World War II. (Detroit Public Library)

WASHINGTON: A new report calls for a US “manufacturing renaissance” amid an intensifying economic and national security competition with China, which has openly stated it intends to displace the US as the world’s leading economy in coming decades.

The new report from the Reagan Institute, titled “A Manufacturing Renaissance: Bolstering U.S. Production for National Security and Economic Prosperity,” provides four recommendations to strengthen the US manufacturing base. These include modernizing the Defense Production Act, enlarging the US workforce for high-demand trades, creating new public-partnerships and financial incentives to strengthen economic sectors important to national security, and facilitating new forums with G7 and Quad (US, India, Japan, and Australia) countries to coordinate on economic issues.

As to modernizing the Defense Production Act, the report recommends “Updat[ing] the DPA to enable holistic solutions for critical manufacturing facilities, such as targeted visa approvals for STEM talent, direct project financing, automatic fast-tracking of permits, and investments in workforce training.”

In a press release, Task Force co-chair Marillyn Hewson, the former CEO of Lockheed Martin, said, “The economic and national security threat from China cannot be ignored. There is bipartisan support to take action, and this report identifies steps that we can take to strengthen and leverage investments in infrastructure, facilities, technology, and most importantly, people.”

The report comes as President Joe Biden signed his signature legislation, the Infrastructure Investment and Jobs Act, into law last week. That bill provides trillions in funding for updating America’s outdated infrastructure, investing in US manufacturing, and upskilling the US workforce for emerging industries such as clean energy.

The report also comes as Senate majority leader Chuck Schumer, D-N.Y., is trying to attach the US Innovation and Competition Act, previously called the Endless Frontiers Act, to the fiscal year 2022 National Defense Authorization Act. The USICA is a massive bill intended to bolster US research and development in key tech and manufacturing sectors, such as artificial intelligence, 5G, and microelectronics.

The House has already passed the FY22 NDAA, and the bill is moving through the Senate now. The Senate passed the USICA this summer with bipartisan support, but House leadership failed to bring the bill to the floor for a vote.

The Covid-19 pandemic has also revealed weaknesses in the US supply chain, with a bipartisan congressional task force this summer accusing China of “weaponizing” those gaps. Meanwhile, there is a growing push from both government officials and private sector leaders for on-shoring critical US manufacturing capabilities for everything from semiconductors to healthcare supplies.

“The COVID-19 pandemic showed us that we can no longer afford to neglect the resiliency of our supply chains and defer capital investment in national security-critical sectors. The pandemic also demonstrated the creative potential inherent in America’s economy,” said Reagan Institute Task Force co-chair David McCormick in the press release. “By investing in that potential, we can rebuild a world-class manufacturing sector that helps to keep our country safe.”

The report highlights six challenges facing the US: A “significant” gap in high-tech manufacturing skills, “unsatisfactory” gains in productivity, “inadequate” investments, “exceedingly fragile” supply chains, “insufficient” accountability of government officials, and “inadequate” international cooperation.

The Wall Street Journal recently reported new data that shows US tech companies and private equity firms are pouring billions of dollars of investments into China’s domestic economy, particularly for microchip innovation and manufacturing. The Journal reported that the net result of these investments is that US firms are “aiding” China as it vies to catch up to and eventually pass the US.

The US finds itself in its current state following decades of outsourcing and offshoring its once globally dominant manufacturing base, which proved a difference maker for the US in conflicts over the decades. With those manufacturing capabilities went hundreds of thousands of skilled, well-paid jobs.

Whether the US can reverse decades of what government and industry officials are just now awakening to as near-sighted decisions remains to be seen. But government and industries leaders increasingly speak with urgency about the matter and link manufacturing re-shoring as necessary to national security.

Indeed, the Reagan Institute report notes how the pandemic “revealed how vulnerable the global supply chains are to shocks and disruptions” and calls for the US to “build an agenda that recognizes the importance of domestic manufacturing for national defense and economic strength, both today and in the future.”